by Lloyd's List

9 October 2024 (Lloyd's List) - THE surge in containership newbuilding orders in 2024 has pushed the orderbook to a record level as a percentage of the existing fleet in service.

But a high proportion of the existing orderbook is required simply to replace ageing tonnage. More newbuildings will be needed for the big players to keep pace with longer-term demand growth.

According to Alphaliner, the top 10 largest boxship operators have 431 containerships on order, providing a slot capacity of some 5.9m teu. The same carriers still operate 683 boxships of 20 years or older, with a combined capacity of around 2.6m teu.

“Assuming 25 years as the ‘normal’ commercial lifespan of a seagoing cargo vessel, these numbers suggest that the top 10 operators could, between them, use 44% of their combined orderbook just to replace the oldest ships in service, rather than for growth,” said Alphaliner.

However, it noted that the need for replacement tonnage varies considerably from carrier to carrier.

According to Alphaliner, world’s largest carrier Mediterranean Shipping Co has an orderbook of 137 newbuildings, with a slot capacity of some 2m teu.

But MSC operates 315 containerships of 20 years or older, with many of these ships being candidates for recycling once its newbuildings hit the water during the next five years.

Its fleet includes numerous vintage containerships built in the 1980s, with the oldest being the 42-year-old MSC Eyra (IMO: 8201648). So far in 2024, MSC has sold 12 ageing containerships for recycling, according to Lloyd’s List Intelligence data.  

Alphaliner argues that 60% of MSC’s capacity on order could be used to replace ageing vessels.

Meanwhile, the eighth-largest boxship operator, HMM, only operates one ship in excess of 20 years of age, but it has 13 newbuildings on order.

According to data tracked by Lloyd’s List, some 230 containership newbuildings with a combined capacity of almost 3m teu have been contracted since January.

Some orders have not been confirmed as firm contracts and are either at letter of intent stage or are awaiting shipbuilding contract refund guarantees.

Further orders expected to be announced soon include up to 30 ships, with capacities of 9,200 teu and 18,000 teu, for the world’s fifth-largest carrier, Hapag-Lloyd.  

“Today’s orderbook is the largest it has ever been in terms of teu capacity. This year’s ordering frenzy was, at least in part, driven by the carriers’ ambition to increase vessel efficiency and make greater use of alternative fuels such as LNG or methanol,” said Alphaliner, which noted that apart from cost reductions, carriers’ overall aim has been to decrease carbon dioxide emissions per container over a given distance.

In its recent container shipping market overview and outlook, BIMCO noted that after increasing in 2024, owing to Red Sea diversions, vessel sailing speeds were expected to reduce in 2025.

This is because of the need to comply with more stringent emission reduction regulations taking effect. This will reduce the available ship capacity.

Orders placed in 2024 have been heavily biased towards large ships in excess of 4,000 teu. Only eight vessels of below 4,000 teu have been ordered this year, according to data tracked by Lloyd’s List.

Braemar container market analyst Jonathan Roach believes a lack of investment in smaller ships could mean operators will face a shortage of vessels available for feeder and intra-regional services.

“In the sub-panamax sector (3,000-3,999 teu), the orderbook is only 158 vessels. The 25-year cohort for this sector is 555 ships. Cascading driven by the surge of large ship deliveries will help with replacements, but newbuilding support will be required,” argued Roach.

He expected the increase of services with the introduction of existing bigger ships to regional trades to be significant over the next few years. However, he believes demand for smaller ships will remain.

“There is very little investment in the small feeder segment (below 1,000 teu) and with the forced demolition of the oldest units in this size, band pressure will mount on the adjacent 1,000-2,999 teu sizes when the small feeders are forced out,” noted Roach.

He believes cascading will assist the potential shortfall of feeder ships to 2030, but the balance will require strategic newbuilding investment.

“We expect strong interest in 1,700-1,900 teu and 2,500-2,900 teu ships. The smaller ship arena will be an opportunity for tonnage provider newbuilding investment,” said Roach.